Delayed car-tax bills may be first ripple of state budget tsunami – News –

PROVIDENCE — Property tax bills have gone out across Rhode Island, but in most cities and towns they do not include car taxes.

No, that does not mean the car tax is done — finito — and there will be no more local levy of up to $35 on each $1,000 of a motor-vehicle’s assessed value.

For new car owners, that can add up pretty quickly. And for the owners of clunkers, the promised multiyear phaseout was designed to eliminate the tax entirely, much quicker.

The delayed tax billings reflect uncertainty across R.I.’s municipal landscape about how much state lawmakers will earmark for reimbursements to the cities and towns for their lost car tax revenues in the over-due state budget for this year.

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House Speaker Nicholas Mattiello told The Journal on Friday he remains committed to fully funding his signature car-tax relief plan and confident federal relief dollars will enable the legislature to stay on track.

“We are maintaining our commitment on the car tax,’’ he said. “People expect it. People deserve it.”

But as state lawmakers wait to see how much — if any — relief Congress sends the states’ way, Rhode Island’s projected current-year deficit is growing.

Ponder this: The estimated gap between anticipated revenues and spending this year is $757 million, but that does NOT include the required repayment this year of $120 million taken from the state’s “rainy day fund” to plug the hole in last year’s budget.

“If the repayment of the rainy day fund is included, then the deficit is at around $877 million,’’ Department of Administration spokesman Robert Dulski told The Journal.

It is not clear if that includes the buckets of red ink in state agencies.

State Transportation Director Peter Alviti told the Senate Finance Committee this past week that his agency “faces a $70.0 million shortfall – crippling the RhodeWorks program.” Among the contributing factors, he cited: a ”gas tax revenue shortfall … due to COVID.“

“If projects shut down we will have unsafe roads and bridges, additional shut down and startup costs, huge loss of income to construction industry and job loss,’’ he said.

His suggested “long-term solutions (FY 2022 and forward): Gas tax increase; increase to DMV fees (license and registration).“

The administrators of the deficit-plagued state hospital — who have not billed Medicaid for a year because of potential rule violations — told the House budget-writing committee weeks ago a money-saving restructuring plan was imminent.

The only explanation from Randal Edgar, spokesman for the Department of Behavioral Healthcare, Development Disabilities and Hospitals, for why this has not yet been produced:

“We continue to work on a plan for Eleanor Slater Hospital. In the process we are assessing different options, with the goal of best meeting the health care needs of our patients and all Rhode Islanders.”

The city and towns’ car tax dilemma is one of many repercussions of the state’s humongous financial problem.

Put simply: the legislature in 2017 committed to reimbursing the cities and towns for their lost local revenue, as a result of car tax phaseout. Each year, the amount of each vehicle’s assessed value that is exempted from taxation goes up, along with the state’s reimbursements.

Barring a change in law, the exemption was supposed to go from $3,000 to $4,000 this year, at a cost to the state of $112.5 million in reimbursements which would be $22.2 million than the budgeted tab for the year that ended on June 30.

In January, Gov. Gina M. Raimondo proposed tweaks that would have reduced the exemption to $3,800, instead of $4,000 — and pushed the final year from FY 2024 to FY 2028 — to save close to $12 million this year.

But the governor’s entire FY2021 proposal — submitted before the pandemic — is on hold, with no legislative action expected on the budget until sometime after the September 8 primaries.

Providence is among the handful of communities that sent out car tax bills anyway.

“Our motor vehicle bills were calculated and billed in July using the currently approved phase-out schedule. We are anticipating $22,681,914 for reimbursement for FY21 should the original schedule be adopted by the legislature again … with a $4,000 exemption,” city press secretary Patricia Socarras said Friday.

Mattiello’s home city of Cranston is another story.

There, Cranston Mayor Allan Fung — whose wife, Barbara Ann Fenton-Fung is running against Mattiello for his home-district seat — said:

“We held off on sending this bill because we were waiting for the legislature to enact a FY21 budget so we know what amount we will be receiving for the exemption.

“We don’t want to be caught in a predicament where we are hitting our already hurting taxpayers with a supplemental car tax bill later if the legislature fails to fund the exemption.

“For the car tax, we were expecting to receive over $2.5 million in August but received only $840,000. The withholding of the car tax funds as well as the state only providing our city with $400,000 in [payment-in-lieu-of-taxes] when we were expecting over $4.8 million … is a gut punch.“

“The legislature needs to act and it needs to act now,’’ Fung said.. ”It is ridiculous that cities and towns have been left to fend for ourselves. All is can say is ’Do Your Job!’ ”

In response to questions about how the legislature can afford the $112 million car-tax reimbursement commitment this year, Mattiello said: “It’s going to be a matter of priorities.”

“They are still talking in Washington. Everybody still expects something to be passed after they compromise, and we still have significant monies in the bank from the first ’stimulus’ which we are expecting to get more flexibility on so it will still be, in my expectation, a difficult budget but … we’ll balance all interests and that’s a very important interest. ”

Without naming Fung, Mattiello added:

“Our municipal leaders have been allowed to make it one of the highest in the country and that’s just offensive.”

The state budget office, meanwhile, has asked state department heads to put together budget proposals for the year beginning on July 1, 2021 that reflect 15% cuts.

“As a state and as a country, we are facing varied and overlapping challenges — including the ongoing public health emergency caused by the coronavirus pandemic, the associated economic recession and staggering jobless numbers, and the nationwide epidemic of racism and bias,’’ Raimondo’s chief budget advisor Jonathan Womer wrote.

“Combined, these have created a difficult policy environment that may require us to fundamentally reshape the way that the State allocates funding and does business,’’ he wrote.

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On Twitter: @kathyprojo